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good friday morning. welcome to "squawk alley." i am carl quintanilla with morgan brennan and jon fortt at post nine of the new york stock exchange record highs across the board as the dow is up 129. session highs now. >> absolutely. we're going to start with apple at fresh highs shares of the tech titan hitting records as three wall street analysts upgrade price targets on the stock mike molson upped his bet on apple from 270 to 290. dan iefs sees it head for 325, and another raises to 290 from 280. joining us, dan ives happy friday >> you too. >> quite a run for apple from here, up 38% in the last 12

months, consequently up 30% in the last six months. those first six months, wasn't doing much, what convinces you, is it mostly the iphone that's got that much more room, 24% or so from here to run? >> great question. there are two components to the bull thesis, a lot more fuel in the tank one in terms of iphone 11 and 5g combined, i view it as a super cycle in the next 12 to 18 months we think you have 400 million iphones from demand cycle still on the horizon, and all our checks show continued up tick not just here but china. and second, the services, the real rating, many haters are scratching their heads the stock has a 3 in front of it early next year. >> seems like more of a see and wait versus wait and see call. you expect 5g to power enough of the story over the next 12

months for investors to bet on it what do you think will be the real catalyst that gets the stock moving in that period, is it wwdc, rumors what the 5g phone will have component wise >> when you get iphone 11, all of the checks throughout asia, we're seeing for fiscal 20, 190 million units. >> you think it runs further when holiday numbers come in >> holiday numbers are trending. china is still tracking 15, 20%. then the second part of that is 5g cycle what i love about this is the one, two punch, combined with services that's why this is a stock that gets rerated from here plus the cherry on top of the sundae, you get u.s., china trade talks, any sort of resolve of that issue adds $15 a share.

>> and would it take off 15 if things county get signed or the china situation? >> it is a poster child. when you look at the name most impacted in the demand and supply side in terms of china, it is apple. at least now from a demand perspective real positive, and as we go to phase one or two, apple is one front and center that benefits there. >> i want to shift gears we have news on another topic you have been following as closely, the jedi contract amazon filed paperwork to protest the award of the cloud contract, winner take all cloud contract to microsoft, saying in a statement numerous aspects of the jedi valuation process contained clear deficiencies, it is important that these matters be examined and rectified. not surprising they filed a protest. how do you think it plays out? >> we were expecting, many expected them to file protest. i think it comes down to this

continues to come at shell shock, they lost the biggest cloud deal ever to microsoft major black eye for bezos. i think there's 45 to 60 day review process we don't see any changes, microsoft are the winner they'll fight it in court. >> why don't you see changes >> because you look at the history of government contracts being overturned, the chance, it is an up hill battle the most scrutinized contract. i believe they dotted is, crossed ts, in terms of knowing they get to this point the political swirls you can't deny no doubt that continues to be an issue. for microsoft, it continues to be them in the victory circle in terms of jedi. >> protests when it comes to government contracting, protests against dod decisions are fairly common, the defense office enterprise solution awarded to

general dynamics, microsoft also got a benefit from also, receiving a protest from the competitor there, too. it is kind of common, but i think from investor standpoint, $10 billion over ten years doesn't sound like a lot for a company like microsoft, but there's so much more potential future business at play for the two companies, right >> that's really the point there's a multiplier it is not just 10 billion. there's another 20 or 30 billion of federal cloud that now microsoft is leading remember, when amazon is doing this, it is not just about jedi, it is a broader, a $100 billion cloud opportunity over the next decade two horse race, google and others obviously there, this is key for investors to focus on. >> how much does it matter when it comes down to it, microsoft won the contract which has huge reputational lift for them cloud wise, even if some piece of this got questioned or overturned it is still, they were put up

there with amazon in a contract that everybody seemed to think was in the bag for amazon. so the follow on effects, seems microsoft could get either way. >> it is a paradigm changer. a year ago 80, 85% chance amazon wins the fact that microsoft is sitting there with a jedi trophy for bezos and amazon is a head scratcher. i think that's why now they're continuing to protest. but to your point, there's a massive ripple effect. i think it is worth $10 a share to microsoft stock. >> just on reputation, not counting the money. >> just on jedi, what it can do in federal opportunity they're not baked into numbers you'll see the street get more bullish on it. this will be a game changer for microsoft going forward. >> all right dan, thanks. aws ceo andy jasy saying, he spoke about the jedi contract

and spoke about the problems that amazon has with the way it was carried out, we should mention. still to come on "squawk alley," inside palmer luckey's company. josh lipton will give us a tour later this hour. what's coming up >> reporter: carl, we're here at anduril. it was a clear mission here. palmer wanted to have a company that created, designed, built defense technology in-house for the u.s. government. got the chance to check out some of the technology. take a look. welcome to the testing site of anduril industries custom built drones that identify and destroy other drones they're finding customers with the u.s. military deploying drones overseas. it is not just drones.

their security towers are stationed on the u.s., mexico border this is their mission, building cutting edge defense technology for the u.s. government. what's next? the company tells cnbc it is exploring software for state of the art goggles, head sets, employ ar technology that gives soldiers new advantages on the battlefield. >> reporter: they already have support of some of the most well known venture investors. founders fund, and contracts with department of defense and homeland security, and u.s. allies like the uk royal marines come here in a few minutes, we'll sit down exclusively with palmer luckey, talk about his company, technology, the position with the defense contractors. a lot to cover, back to you. >> sure is we're looking forward to details

on the intercepter drone another name taking the name from lord of the rings we get that with palmer in a built. next, news to get to on elon musk how he plans to make las vegas boring today. we're going to explain after the break. stay with us no commission. delivery drones, or the latest phones. no commission. no matter what you trade, at fidelity you'll pay no commission for online u.s. equity trades. i athere was a sports carre and a family saloon caron and i always had in my mind that one day the family car could compete in rallies and racing when the mini actually came out

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elon musk's company set to start boring contessa brewer is here to explain that for us. >> the boring machine will be turned on at 3:00 p.m. in las vegas, beginning the tunneling this is the first commercial project for elon musk the boring company, though there's interest in other areas of the nation, bureaucratic red tape stymied those projects in this case, las vegas convention and visitors bureau got the go ahead for the $52.5 million project, and we got a look at the construction in mid october when we were in las vegas. completion is scheduled for january, 2021, when the convention center unveils the $1.5 billion expansion and renovation the people mover, that's what they're calling it, will consist of two one mile tunnels across a 200 acre campus. it will have three stations. it is a big campus they have to get people back and forth. civic leaders are tossing around the possibility they could

connect this system to the airport, to the las vegas strip. some mentioned why stop there, let's connect it to los angeles. for the boring company, this will be something that even surpasses proof of concept it will be completed, it will be in use, and they'll get to show other municipalities look, it works. we can come in, and in vegas what happened, they came in with a bed more competitive than above ground people movers >> that was exactly my question. how much data, how much sort of information can they gather by doing this in vegas to extend it out to other projects elsewhere in the country. >> one thing that made it easier, there weren't multiple levels of regulation the aggravation convention and visitor authority has a 200 acre property they're able to say yes, we want it, it is all there. the only other supervising regulatory board was the county

board, unincorporated area of clark counties that makes it far easier they're saying that's why we could maybe do it to los angeles, it is all desert in between. you're not disrupting existing tunnel lines and things like that >> are there other areas vegas could be an infrastructure test bed? it is unique in that way, it has a thriving economy that can finance some of this >> let's look at the fact that vegas is a convention destination. some of the city's biggest competitors are orlando and chicago. in chicago, it has been proposed there, but again, you have all of the different competing regulatory oversight bodies, they haven't been able to get it done when there's support from one big leader, somebody else gets elected, says i'm not that into it so could it be a test case yeah once they get it done, show how efficient it can be, if it goes the way boring company says it will go and the way las vegas expects it to go, maybe then

we'll see more support. >> what if it turns into the big dig? >> this is one reason why elon musk has been very reticent to talk about it. we were hoping to get an interview with the president of the boring company, steve davis. and they would not make him available to us. elon musk has said we want to wait until the project is finished and then come out and talk about it. >> what are we talking about in terms of numbers quickly, boring with the technology they have there, they cut the cost of tunneling down by something crazy, like 90%. >> exactly you know what, it is in the millions range, instead of 50 million per mile, it is something like 10 million per mile it is much more financially feasible proof of concept was in california a hawthorne. phil lebeau saw how it works that's not someone else paying for it and used in a way that makes sense moving people one

place to the other las vegas thinks this will make them the premier destination, they're going to be able to move them from one side of the lot to the other inch mo more rapid succession. >> last thing you want to do is start off something like this and end up in the hole >> oh boy. >> why do you do that. >> took a minute >> contessa, great stuff thank you. coming up monday, by the way, don't miss exclusive with evan spiegel that is 10:00 a.m. eastern time on "squawk on the street" monday dow up 141 i knew about the tremors.

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it's unbelievable what you can do in the prius. toyota let's go places. welcome back to "squawk alley. we continue to watch the impeachment hearings taking place in d.c ylan mui has more. >> reporter: the hearing has now gone into recess shortly before it broke up, there was an unusual back and

forth between president trump, the witness, marie yovanovitch, former u.s. ambassador to ukraine, and committee chairman adam schiff. it started with this tweet from president trump this morning when he said wherever yovanovitch goes turns bad from posting in somalia to ukraine. during the hearing, yovanovitch was asked to respond >> i don't think i have such powers, not in somalia and other places i think where i served over the years i and others have demonstrably made things better. >> reporter: president trump continued to tweet about yovanovitch and the hearing more broadly throughout the morning during and after the earing, committee chairman adam schiff said that amounted to witness intimidation >> you saw today intimidation in real time by the president of the united states, going after this dedicated and respected

career public servant. >> reporter: we expect that hearing to restart in about an hour or so then republicans get the chance to question yovanovitch for themselves back over to you >> thank you for that. european markets are set to close in a few minutes dom chu has the breakdown. >> all right jon, what we have are european markets finishing mostly higher. you can see here a lot of green behind me, amid optimistic signs on a trade deal between the u.s. and china. the ftse 100 is the underperformer after data showed a slowdown in the uk consumer spending picture last month. those shares are still higher across the index across europe, it is volatile the last few days. stock 600 set to close out above the flat line, just about flat there. let's step back, look at the recent performance for european equities we talked about the relative strength in the united states compared to global benchmarks

this year. since the lows hit back in early august, the stock 600 is outperforming the s&p 500, it is on pace for the biggest annual gain since 2009. that's thanks to better than expected earnings, including today from danish shipping giant maersk that stock up more than 5% in trading, pacing for the best year since 2013. it is kind of an encouraging sign as it is seen as a bellwether for the global trade picture. shipping a huge focus today. back to you. >> thanks so much. let's get a news update. for that, we'll go to sue herera at hq. good morning, sue. >> good morning, everyone. here's what's happening. security forces firing live rounds and tear gas at anti-government protesters in baghdad, killing three people, wounding at least 25 more. at least 320 people have been

killed and thousands wounded since the unrest began october 1st. russian president putin hopes president trump will visit russia in may to mark the 75th anniversary of the end of world war ii he spoke to reporters at an international summit in brazil astronauts launched a complicated series of space walks today to fix a cosmic ray detector at the international space station. nasa considers these space walks the most difficult since the hubble space telescope repairs a few decades ago. many middle aged adults worry about developing dementia, but aren't doing enough to lower risk, according to a new study from university of michigan. while nearly half those surveyed thought they would likely develop dementia, only 5% spoke to doctors about what they could do to reduce the risk. that includes things like increasing physical activity, not necessarily mental activity. you are up to date that's the news update this

hour morgan, back downtown to you >> sue herera, thank you. after the break, the founder of oculus, inside his new defense company coming up. checking where the major averages stand this hour record highs across the board. don't go anywhere. we're back in two. hope, struggles in the spider's web. with every attempt to free itself, it only becomes more entangled. unaware that an exhilarating escape is just within reach. defy the laws of human nature. at the season of audi sales event.

let's head back to irvine.

josh lipton, sitting down with a special guest. josh >> morgan, we're here with palmer luckey. >> thanks for having me on >> since we last spoke to you, palmer, raised more money, another $120 million $1 billion valuation more money you can use to build out defense technology it's also interesting, palmer, i talk to executives here, you're not shy that you intend to take on big defense contractors you're looking at taking on raytheon, northrup grum ond, lockheed what do you think the competitive advantages are in the fight? >> sure, that's what we're trying to do we're a defense technology company first. not a consumer technology company dalk in defense work from day one, said what can we develop that helps the u.s. department of defense, keep america and allies safe. that's why we're building artificial intelligence hardware and software we have a few competitive

advantages we have a strong team that comes from areas where experts in autonomy, computer, networking, those things are lockheed, raytheon, traditional defense prime minister are good at building aircraft carriers, fighter intercepters, don't have the world's best talent for at physical intelligence. -- for artificial intelligence we think we can add value there. >> some would say these are big companies, sizable r&d budgets, smart engineers, big lobbying arms isn't it tough to ultimately displace these giants? >> in a way size works in our favor. if there was a big landscape of smaller highly competitive players, i think we have a harder time raising money. as it is, investors look and say the whole field is dominated by a handful of players that make all of the money, they're old, slow moving, don't have all of the best talent. that type of market is the one where you can believe the most

that somebody can come in and disrupt. >> what about some of the competition. it is not just defense contractors, what about some competition, potentially from big tech thinking about microsoft >> sure. >> pentagon awards them a $10 billion cloud contract, sounds like amazon is going to protest that won that $500 million to build ar goggles for the army. do you consider that a serious rival? >> no, i think we're going to work with microsoft on a lot of stuff. you won't have one company owning everything anyway i am glad microsoft and amazon are vigorously competing for the jedi contract, contrasted with google, couldn't be sure the government would abide to their internal corporate ethics principles there's a difference with jedi and what we're doing microsoft said the military will have access to the best technology, and that's true, but they're also selling to everyone building a product for everyone. everything we build is specifically for department of

defense. we're not saying let's resell the thing where we make 90% money in the consumer, enterprise face, we're saying what do they need. what's the perfect thing i don't think that microsoft, amazon or any of the big tech companies are going all in and saying we're going to build products that are controversial, part of the kill chain, and designed specifically for dod. if it reduces consumer enterprise sales by 1% or increases controversy by 1%, it is likely not worth doing. >> and i think morgan, you had a question >> i do. palmer, thanks for being with us today. to dig in further, you touched on jedi which is once again the news of the day today, but from department of defense side of things, given the future threat landscape, what that will entail when you look to other countries like china which the u.s. has identified as a strategic competitor going into the future, do you think the government has its arms around what it takes to vet out

technology and counter the futu future threats >> i don't think that they have their mind around the best way to do that, they know they need to change, that they need to move faster. in the united states, two unicorns in the defense space in 30 years, and spacex didn't start out to be a defense company, happens the largest provider of launch for the u.s. government i love space i don't want to disparage it, worth noting contrast it with china where you have a lot of new companies doing defense work, lots of consumer technology companies doing strong defense work. china has a strong pipeline from new tech to military deployment. i think the united states knows that they can learn a little from that, they're going to have to to keep up with our adversaries that are honestly better at the innovation pipeline than we are. >> does the u.s., i want to pick up on that in your opinion, palmer, talking about who leads in defense technology, who leads in defense innovation, is it the u.s. or

china? how do you gauge the two >> i think we lead now, when it comes to conventional military force, when it comes to conventional military operations, but i don't think the united states leads in the technologies that will be relevant to the warfare of the future the u.s. is falling behind in areas like autonomy, artificial intelligence china has structural advantages over the united states because they're willing to surveil the population, use it as training system for artificial intelligence models. not saying we should do that, i am very much against that, in fact but china has structural advantages, and in china, the government by law is able to take any technology they want from the private sector, use it for military purpose in the united states, we're lucky our companies are able to say i don't want to work with the government i don't agree with google's decision to pull out of the jedi contract, but i am supportive of their right to do so not saying we need to be more like china on this, that would be terrible. but we have to recognize there are structural advantages in

what they're doing so we have to not do the same thing they're doing, we have to try new things, better things, and alternate routes where they don't really have such a strong advantage. >> and jon, you had a question >> i do, palmer, hi, jon fortt i believe you mentioned making your technology available to the u.s. and our allies. i wonder if you have an internal process for determining which of those allies should have access to your technology or if you view that as the u.s. government's role to make the determination about technologies, in the ai process -- >> i view it as the u.s. government role. they have a lot more information than i have. they know more about moving pieces than i do i don't want to live in a country where you have a hypocrisy of executives deciding u.s. foreign policy. i think that's dangerous i think usually the u.s. is clear cut on these things. people ask me, would you sell to

russia or to china, i usually tell them hey, i don't have to pretend to be the good guy here. there's a lot of laws that regulate how we export things. you have to have permission to export certain things to certain countries, that's the way it should be. you shouldn't have any company in the united states able to just take their technology that has military applications and spread it all over the world like we're doing work with the united states, doing work with the uk, doing work with a few strong u.s. allies, and the u.s. government is supportive of that if we go rogue, say we're selling to people the u.s. doesn't like, i think it would change quickly. >> as you sell the technology, palmer, to the u.s. and allies like the uk, it is powerful, it is cutting edge, dynamic are you ever worried it will be used in ways that maybe you and the team didn't intend >> i think that every technology will be used in ways we never envision we have to build accountability into it from the start

we have hardware and software tools that let them understand everything around them, perfeitd be used by the wrong person. you give people more information, it is a bigger liability if they're compromised, more important to have network security right so nobody can break in and use it against you. at the same time, there's an advantage. machines can't be bribed or turned as easily as people can if we can make a system that's on the whole more robust to abuse, i think that's the best you can hope for. >> is it also, are you saying you have a lot of trust and faith in the u.s. government, u.s. military? >> i have a lot of trust and faith in the u.s. military as an institution when you give them the tools they need to be accountable. when you give them more information how systems are used, when they were deployed, what they were deployed for, i think they have strong systems to make sure that things are not misused, and when they are misused, there are consequences and there's liability to the right person i think one of the big examples

is that the united states is a strong policy around making sure humans stay in the loop on deployment on autonomous weapons. a person has to take responsibility for any lethal action other countries don't have that sense of responsibility. i think the united states is way ahead when it comes to the ethics of autonomy as applies to warfare. >> morgan, you have another one? >> i do. palmer, i want to get your thoughts on something that's unfortunately become a hot topic button, but i want to move beyond the politics and get thoughts on border security. historically speaking, that's been in focus, and the idea of virtual wall has been attempted by the u.s. since the mid 1990s. we have seen a number of projects happen and fail, the most high profile, sbi net program that was contracted to boeing the technology you're developing today, part of the reason we haven't seen effective border walls implemented and even

having a conversation about an actual structure, metal structure being put up is because the technology has not been cost effective and hasn't been productive or effective has the technology evolved enough now that that's a different conversation than it used to be >> yes the technology is there, our company is there one of our -- we do a lot of work with customs, border protection, our century towers cover hundreds of miles on the southern border. the time is now. we can have a perfect picture of everything that's coming across the u.s. border, perfect picture of every vehicle, person, drone, maybe not perfect, 99% right, but that's better than what's out there now in a lot of these places the other advantage is you don't have to slice and dice the land into different pieces. we work with land owners on the border, putting towers out there. most of them want border security, want to protect land

from being used for drug and human trafficking both directions but what they don't want is a physical wall, cutting land apart, making it impossible for cattle to water on the rio grande, things like that our tech makes it easier for those two things to come together, to have strong border security without infringing on anyone's property rights. >> i want to get your take do you think annual benefits because you're a well known supporter of president trump, does that benefit the company competing for work, is that any risk if he doesn't win re-election? >> i think the dod is nonpartisan. people focus on look, politics makeup a tiny fraction of percent what i spend time on it is the thing that gets a lot of media attention, people focus on it. reality, dod go through different administrations. they're working on the same projects, there's not a lot of change on partisan basis

i think we'll do well under a republican president, well under a democrat president, do well under a libertarian president. if any other party were to get relevance -- >> one of your big backers is peter's fund he seems like he has the president's ear. you say that doesn't have meaningful impact competing for government work? >> i don't think so. i don't think people in the dod take that into account the reason peter is investor in us is not because we agree on the president, it is because founders fund which is his fund was the first in oculus. i have a relationship going back with peter, he believed in virtual reality when there was never a successful virtual reality in history he is able to see when things will work before other people see they'll work same here. it is clear that the u.s. department of defense needs more companies doing strong technology work, saying we will stick with the government, we're not going to back down, we're not going to say we can't work

with you because it is controversial. >> we appreciate the time. thanks very much >> guys, back to you in new york >> thanks so much, josh lipton with palmer. meantime, watch out for dow 28 k got within 50 points of it dow originally hit 27 k for the first time on july 11th. but despite mixed results out of retail sales, mixed results out of empire manufacturing, vix getting crushed as people are buying blue chips. >> more broadly, look at the s&p, applied materials are doing well off earnings. it is up 10% lamb research, roku got a good call, and is back above where it was after it reported earnings that spooked some investors. we had the ceo on talking about how he said from his perspective strategically they were firing

all cylinders. investors seem to have come around to that point of view >> the makers of the equipment for semiconductors have really had a strong showing in the earnings cycle a lot of names trading higher, including the dow, caterpillar, up 1.5%. boeing and names tied to trade hopes. it will be something that we continue to watch as we close out another week of trading. all of the major averages on pace for gains >> the dow components that performed best since 27 k, apple, intel, dow. let's get to rick santelli for the santelli exchange. interesting day, rick. >> interesting day, interesting week year end will be more interesting. like to welcome dr. nathan cheats a deep rest anyway dr. sheets, thank you for

joining me. >> pleasure to be here thank you. >> considering all of the areas within and outside government you worked in, i want to ask you the big question what do you think of global growth it seems as though the equity markets paint a picture there may be surprises, as i continue to monitor data, especially in europe and germany, specifically in japan, my hopes are diminished what are your thoughts >> we have a two track global economy right now, the manufacturing sector is quite weak services is hanging in there, central banks are to the rescue. as we look around the world, there are some spots of concern. i particularly share concern about the recent japanese data you know, they just had a consumption tax hike, and historically before the hikes

they had booming quarters of growth the last quarter with the hike imminent, it was barely positive it makes me worry about the underlying strength of the japanese economy as you said as well german manufacturing remains very weak as well. there are some concerning spots out there. >> the international institute of finance released something that made my heart stop. first half of 2019 we saw increase of total global debt by the tune of 7.5 trillion, which brings the amount to 250.9 trillion with a t, and that increase is 60% guess who, china and the u.s. are we reliving reinhart and rogue ards, ten years plus after the crisis, still weak capital

spending, and long expansion with weak growth, weak productivity that isn't helping, is it? >> it certainly isn't. and it is public data in the united states, and it is private corporate debt in china. when we think about why rates are as low as they are, i think these thaey're making people nervous about the future, uncertain of prospects, weighing on willingness of particularly businesses to invest that's the missing element of expansion. we haven't seen the business investment consumer has been solid. >> in the time remaining, it

isn't just the debt. look at the democratic field that wants to be the candidate for 2020 a lot of talk of raising taxes you look at the debt i described and demographics in the u.s. and to some extent the rest of the world, think japan, too, there are so many less taxpayers we are guaranteed a future of higher taxes, that's not great for economies. your final thought >> when i look to the future, talked about debt as an important constraining variable. demographics are really looking grim and when you think about the political implications of that, more payments from the government to aging generations are likely to require more taxes on workers how are those workers going to respond. they may say i want more government spending as well. and then we're in a world of

huge deficits. >> we have to leave it there, doctor i think that's why modern monetary policy was born thank you for your time and answers today. jon fortt, back to you >> rick santelli, thank you. after the break. ten lessons for the likes of apple and disney, if they want to take down netflix hulu former head of ntt coen acquisition joins us with that next it was sophie's big day. by the way, she's the next mozart. as usual we were behind schedule.

but sophie's enthusiasm cannot be dampened. not even by a run-away donut. we powered through it in our toyota prius. because a star's got to shine, no matter what. it's unbelievable what you can do in the prius. toyota let's go places.

here is what's coming up top of the hour. avenue capital mark lasry with us for the hour. we talk markets, new opportunities to make money, and elizabeth warren's wealth tax. trades on nvidia, qualcomm and others the call of the day a big one for lyft jpmorgan calling that stock its top pick right now we'll find out if our committee agrees at noon just ten away. we'll see you then >> thanks. meantime, let's get a news update with sue herera >> we have some breaking news now. the jury has reached a verdict in the roger stone trial roger stone, a long-time friend and ally of president trump was charged with lying to congress, witness tampering, and other he has been found guilty on all counts of that roger stone found guilty on all counts he was accused of lying to congress, witness tampering, and basically the verdict came two hours after the jury started its deliberations on this second day.

the jury was charged yesterday they came to their verdict after only two hours this morning. he has been found guilty on all counts carl, back to you. >> thank you very much we're going to keep our eye on obviously that headline, house intelligence committee continues its hearings into the inquiry of the impeachment of the president. none of this really matters to the market >> i was just thinking that. >> despite some of the land mines of the week, i'm thinking of daimler warning or retail sales core slowing down on a three-month rolling basis. cisco, obviously one of the highlights and jim was mentioning next week we'll get a better sense on retailers and whether or not there is some underlying weakness in software town the road >> he said he country really see weakness there is some concern after they reported earnings, but then at analyst day out in l.a., the way he projected they were going to do over the next year gave

investors a lot of confidence. software is doing better >> meantime, we're less than 80 points away from 28k so we'll be watching into the close later today. >> "squawk alley" continues in a moment of course dow is up 143 and we're hanging onto 3113. dana-farber cancer institute discovered the pd-l1 pathway. pd-l1. they changed how the world fights cancer. blocking the pd-l1 protein, lets the immune system attack, attack, attack cancer. pd-l1 transformed, revolutionized, immunotherapy. pd-l1 saved my life. saved my life. saved my life. what we do here at dana-faber, changes lives everywhere. everywhere. everywhere. everywhere. everywhere.

welcome back to "squawk alley. veterans of streaming offering advice to those in the space ten lessons for disney, apple, and all the new streaming companies trying to take down netflix. we're joined by one of the co-authors alex krugla alex, thanks for joining us today. it's quite an op-ed you've written here sort of the big headline here is getting a subscriber and keeping a subscriber is the focus. and the second is much harder. explain that to us >> yeah. if you think about a subscription business, essentially you have two jobs and only two jobs. one is to get somebody to

subscribe. and the second is to get somebody to not unsubscribe. it's hard especially if you're giving something a free trial or a free month or an extended opportunity to sort of sample something. getting somebody to take out their wallet on a monthly basis and renew that subscription is very tricky. so the numbers to watch for is not just the net ads which is an impressive, important metric especially for someone like the walt diz nae company but it's how long are they sticking around and how much engagement are you seeing from them >> you mentioned that the value of unwatched content is negative, not zero what do you mean by that >> you've probably heard the expression netflix and chill it's from this tongue in cheek concept, you turn it on and don't know what to look for. fundamentally, if you open up an offering and there's a lot there and there's not much that you want to watch, sometimes the

bulk of what's there especially if it's secondary content actually makes you think the service is worse than if there is a small amount of stuff there but it's the stuff you actually want to watch. >> alex, you argue in this piece that data doesn't really matter as much to these services in terms of informing how they create content as at first netflix, for example, led us to believe. that suggests to me that netflix is in big trouble. if they don't have a data advantage, disney certainly has a library advantage. some of these other companies do are they just supposed to be smarter internationally? how can they aside from spending tons and tons of money one long-term? >> well, so there are two distinct elements of data and analytics. when it comes to product and usage, data and artificial intelligence is crucial as far as content discovery, content recommendation, you name it. when it comes to green lighting

and making content, fundamentally the hollywood ecosystem has actually been using data for decades and decades and dekz in many ways, the story that netflix and others told wall street around yauzing data to select scenes and to cast was a narrative that was a sales narrative rather than a real story. so when it comes to making content, you absolutely can identify the users for whom you want to make content but good programming is mostly a judgment call. to answer your question about netflix's advantage, they have many years of advantage as far as how people navigate their environment and what people choose to watch. so as a result, they know what to license and they also know what to make not necessarily, they don't necessarily know how to tell the best story using data, but they absolutely know which stories to tell and which stories not to tell >> alex, i mean, hollywood's data collection in deck' past is -- it's so rudimentary, right? what was it beyond focus groups

asking would you go see "x." now they ask how long you would see it for >> that's absolutely true. although i would argue -- it's funny because having been inside one of these companies, i would argue the way in which traditional hollywood parses data is actually quite impressive in terms of knowing where in the segments people are watching, what the retention rate in live tv is you know this because you look at the data with your live viewership so there is more data -- so there's certainly more access to information. but when it comes to what story makes sense, the data doesn't necessarily tell the picture a great example of that is the first hit that netflix had, the first true hit was "orange is the new black. and this was a show that starred people that were not familiar to the audiences. it took place in a prison. and most people were wearing orange jump suits. no data could have told them that show was going to be a hit. the reason it connected was it

went after a demographic they needed and it was a well told story "flee bag" same thing when it comes to amazon. >> all right alex, thanks for joining us today. important conversation and of course disney is the worst performer in the dow down 1% >> thanks for having me. that is going to do it for us here on "squawk alley." let's get to the judge and request t the half." >> all right, carl thanks so much i'm scott wapner front and center, a misof record run. is your money ready to run into the end of the year? it is 12:00 noon and this is "the halftime report." >> the bulls marching on stocks hitting new highs should you keep riding the rally? or take money off the table? billionaire investor marc lasry weighs in. where he's seeing opportunities in this market right now nvidia, applied materials, qualcomm, amd, and more. a ton of stocks getting their price targets raised we'll break down the calls and tell you how to play these names from here.